Can Zimbabwe’s small scale miners boost gold output?

Rumbidzayi Zinyuke
FOR years, gold panning has been a source of livelihood for thousands of Zimbabweans who have trekked to the numerous resource rich areas in the country in search of riches.

The lucky ones have been able to strike gold, so to speak, while most have managed to provide a decent life for their families back home despite running battles with the police.

Many others have not been so lucky.

And because gold panning was a criminal offence before 2014, most, if not all, of the gold never made it into the formal system. So the fiscus never benefited from the activities of the illegal miners, who were fast destroying the environment in search of personal riches.

Their significant contribution to gold production was not accounted for in national production statistics as they sold their share on the black market.

It is estimated that more than 15 tonnes of gold, worth over $400 million, were smuggled out of Zimbabwe between 2002 and 2007.

In 2014, reports say the Zimbabwe Republic Police intercepted more than 20kg of gold being smuggled out of the country while 180kg was intercepted from illegal panning sites.

It was on the back of these developments that Government agreed to decriminalise activities of gold panning and formalise small scale and artisanal miners. And the country began to see a significant increase in their contribution as gold started flowing through formal channels.

Government has also availed several facilities aimed at improving the operating conditions of the small scale miners who now contribute 36 percent of total gold produced in the country.

This includes a $100 million agreement with Xuzhou Construction Machinery Group (XCMG) of China for the provision of small-scale mining equipment on credit in 2014. Of this amount, Zimbabwe has been able to draw down the first tranche of mining components worth $5 million from the facility.

Reserve Bank of Zimbabwe governor Dr John Mangudya recently announced the availing of another $20 million facility to support small-scale and artisanal mining operations to increase gold production.

This has shown the commitment by the Government to rope in all stakeholders into the matrix of economic recovery.

Fidelity Printers and Refiners head of gold operations Mr Mehluleli Dube says the objective of the $20 million facility is to increase output in the shortest possible time.

“Focus will be on ore output from the mining operation which should dovetail to increased gold output from the sector. It is our view that all parties to the facility will play ball and without a doubt achieve the objective,” he said.

He says small scale gold mining in Zimbabwe is reasonably organised and with funding the sector should contribute significantly to a better performance of the economy.

Government has also introduced gold mobilisation strategies, including setting up of 11 gold buying centres across the country for the purchasing of the mineral from artisanal and small scale miners by Fidelity Printers.

But the gold buying centres are still limited to towns and a few mining areas, leaving the majority of areas where gold is being produced open to illegal buyers.

The yellow metal is Zimbabwe’s second largest mineral export earner after platinum and capacitation of small scale producers wiil play a crucial role in increasing national annual gold production.

Between 1980 and August this year, the country extracted only 586 tonnes of gold. Production reached its peak in 1999 at 30,2 tonnes and was at its lowest in 2008 at only three tonnes.

But the question remains, will Zimbabwean small scale miners ever be able to push gold production to the 1999 levels if they access these facilities?
And will they ever stop selling their gold on the black market?

Small-scale miners say they can increase annual gold production if they have the requisite technology and working capital to improve production efficiencies.

But as things stand, there is still a significant amount of the yellow metal being smuggled outside the country to be sold at higher prices than those obtaining in Zimbabwe.

With more than 700 000 small-scale gold miners, a huge chunk of which is still operating without mining licences, there is bound to be many leakages.

While Mr Dube agrees that more needs to be done to curb these leakages, he says their efforts have so far been successful considering the increase in sales to Fidelity Printers from an average of 200kg per month in 2013 to around 750kg being sold currently.

Official statistics show that small-scale miners’ contribution to output has been gradually increasing since 2014.

“In the last two years, there has been a lot of effort by various stakeholders (including Fidelity) to encourage small scale miners to sell their gold using formal channels rather than illegal channels. Also, removal of presumptive tax and reduction of royalties from five percent to one percent has gone a long way in encouraging small-scale miners to sell their gold to Fidelity,” Mr Dube said.

After Fidelity Printers was declared the country’s sole gold buyer, purchases reached a monthly high of 790,4 kg in December 2015.

The total bullion sold by the small-scale miners in 2015 was 86,4 percent up from 3,9 tonnes in the previous year to 7,3 tonnes.

For the eight months to August 2016 small-scale miners had sold a total of 5,5 tonnes two tonnes less than sales from primary gold producers who have sold 7,8 tonnes in the same period.

But while sales to Fidelity Printers have gone up, experts believe there is still more bullion being sold on the black market especially in areas where Fidelity’s gold buying centres have not yet been established.

Zimbabwe Miners’ Federation (ZMF) spokesperson Mr Dosman Mangisi says the leakages could be a result of the slow process of formalising small-scale miners.

“The numbers for gold sold through formal channels have increased over the years and we are hoping to supply a bigger chunk of the targeted 24 tonnes this year. But the process of formalisation also needs to be expedited so that all miners can sell gold to Fidelity. If we map and scale them we will minimise leakages. They will also be able to get assistance in terms of machinery and marketing their product,” he says.

Mr Mangisi also said a formalised small-scale sector would also result in less disputes such as the one at Durban Gold Mine in Bubi District where 300 illegal miners recently invaded the disused mine.

He said the ore extracted under such situations would never be accounted for as the miners want to sell to smugglers to avoid detection by police.

He believes the $20 million facility availed by the central bank is a shot in the arm for small-scale miners who are in desperate need of mechanisation.

The plan to mechanise small-scale gold mining is part of a raft of new measures to decriminalise activities in the sector to increase deliveries to Fidelity Printers.

If they access the facility, small-scale miners will be obliged to meet Government halfway and sell their gold to Fidelity.

Government on its part has a bigger role to play.

It has to make sure that the facility is managed properly and that miners in every part of the country equally benefit from the machinery. It cannot concentrate on a few mining towns and neglect numerous other areas where gold mining is taking place.

More than that, there has to be a system in place that will ensure that those who benefit from the facility sell all their gold formally.

But selling gold formally has been coming with huge costs that most miners could not afford. The taxation and fee structure was too steep.

Until the interventions by the central bank chief, that is.

Dr Mangudya proposed to scrap a two percent Environmental Management Agency (EMA) fee.

“The fee for exploiting the environment at two percent of gross revenue is extremely high. Consideration should be made to scrap this fee in order to enhance gold production,” said Dr Mangudya.

He also proposed to reduce the Environment Impact Assessment fee to a rate of 0.05 percent of the project cost from a rate of up to 1.2 percent.

He also suggested a reduction of the custom milling fee from the current $8 000 to make sure that all millers sell their gold on the formal channel.

The miners say these measures will make their work easier and promote gold processing which in turn increases value of the yellow metal.
Said Mr Mangisi: “We have the capacity to extract gold but what we do not have capacity for is processing. Reducing custom milling fees means we will have more millers because the current 51 are not enough to process all the ore small-scale miners extract.”

And commitment from both small-scale miners and Government, the gold sector can become more organised with an efficient value chain which will drive the economic recovery of Zimbabwe. — Zimpapers Syndication.

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